The financial services corporation has some 2.3 billion cards in circulation, accepted in 205 countries at 38 million merchant locations generating an average of 160 million transactions an hour.

David Rich, senior vice president of Global Partnerships & Business Development at MasterCard, told CME Group’s “Tech Talk 5.0: Next Generation Financial Technology” audience in July that making sense of the numbers requires an equally staggering number of equations.

“Each time those transactions come in we process them,” Rich says. “We apply about 1.9 million rules and algorithms to make sense of those transactions.

MasterCard has been doing this for so long that it has been able to cleanse and normalize data from a longitudinal perspective going back as far as 40 years.

Central to the conversation, however, Rich emphasises, is privacy.

“Privacy by design is a key component of how we look at data,” he says. “A significant amount of data analytics are actionable with regards to privacy. No matter what level of privacy you have, you can still provide a very significant level of analytical capability.”

The data is used by just about every industry vertical on earth: MasterCard works with 44 of the top 100 retailers in the world, 10 of the top 15 restaurants, 13 of the top 25 hotel chains.

The way the company aggregates data, he says, allows analysts to see consumer trends in real time.

“This is very important for financial forecasting when you’re looking at it from macroeconomic perspective,” he says, adding that the U.S.Department of Commerce figures come out with a significant time lag often in the order of months.

“When we look at the gasoline spend, for example, we can see that discretionary spend – the money that was being saved as gasoline prices went down – was not necessarily translating into discretionary retail spending.

“We could see this much earlier than market analytics could.”

AI Applied to Finance

Drilling even deeper into next generation data with automated model creation is the work of the cognitive analytics startup from Austin, Texas, SparkCognition.

CEO Amir Husain told Tech Talk that its financial platforms are able to spot anomalous patterns in a veritable sea of data.

“We’ve proven that it works and it works very well,” Husain says. “Today we have close to 40 clients, some of them the best-known companies in the world.”

With applications for industry that range from wind turbines to pumps, SparkCognition’s platforms have been able to extend failure predictions from five hours, using human-generated models, to five days using its automated models.

He says it’s now time to begin applying these models to financial services.

“At first blush, it may appear there’s a huge difference between a machine on one hand and financial markets on the other, but there are a lot of similarities from a mathematical perspective,” Husain says.

AI models, he says, have the ability to outperform human models by an order of magnitude and can now accommodate the nuances of language to process meaningful data.

“What it means is that soon AI services will be able to understand almost at that palpable level.

“When you see a good trader they have a feel for the market, but what is that feel? It’s a collection of patterns in their biological neural network that get triggered when they see something that smells, tastes, looks like something they’ve seen before.

“We are now bringing these aspects, the numeracy … and language understanding, and we think this will democratise the way value is extracted from financial data.”

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About OpenMarkets

OPENMARKETS online magazine, produced by CME Group, is designed to keep you up-to-date on developments that can enhance your successful participation in the dynamic derivatives industry. The magazine features customer case histories, new product information, technology updates, trend stories, and timely online-only news briefs.

About CME Group

About CME Group

As the world’s leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through the CME Globex electronic trading platform and trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the largest central counterparty clearing services in the world, which provides clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort.